"A Committee of Correspondence"

16 May 2019

"Face" By Walrus.

My Father traded in Asia from 1935 to 1942 and then from about 1953 to 1990. I was privy to many discussions and engagements with our customers over the years as well my transactions in my own right. I don't think the Washington decision makers, as opposed to perhaps career Sinologists in the State Department, quite understand the dynamics of the Trump Administrations relationship with China and the risks America appears to be running. The bit that seems to be missing is a realistic appreciation of "Face".

A quick search of the internet reveals scholarly definitions of "Face" together with the description of it in socio - cultural terms that in my opinion do not do it justice. Couple that with Western insensitivity, NeoCon hubris and Trumps preference for believing everything is a negotiable transaction and we are set up for a monumental falling out with China that has lethal consequences for America.

I will give a few examples of Face, you can find plenty more on your own. Did you know it is an insult to request a Chinese to sign a written contract? If he has agreed to the terms and said as much in front of other Chinese then that is enough. "Face" does the rest. Did you know that in certain circumstances "Face" requires you to lie to, or ignore, authorities in support of family and friends? This last, in my opinion, is the reason for the current Chinese attempt at omnipresent surveillance; "we tremble at the power of the Emperor in Peking, but the mountains are high".

Col. Lang makes the point that the Japanese went to war to dispel the threatened perception that "they weren't the men they thought they were". Well with "Face' in China its more than that, you are your "Face". To damage someones "Face" is to create a lifelong mortal, implacable enemy. There is no way, short of death, to recover once you have given offense. Against that standard Trump, Bolton and Pompeo are playing with fire. "Just kidding" doesn't cut it.

It may surprise some of you to know that the West was trading with China right through the cold war - in US dollars only. Nixon didn't discover China either. It also may surprise some that China is perfectly capable of making very high quality reasonably priced sophisticated goods, and always has been. The reason that Walmart sells cheap Chinese schlock is because that's what they asked China to supply. As for "stealing intellectual property", don't make me laugh. We all do it and China has plenty of very smart people that create first rate IP of their own.

I make the case that China is a sophisticated and capable economy, with its own amour propre, not some third world hole populated by leaders that can be bought or threatened, and Trump risks forgetting this at our peril.

To this end I note that the trade war is not going to Americas advantage, China has vast holdings of American debt, China buys Iranian oil, judging by reports of Sochi discussions, Russia AND China are likely to support Iran and both Korea and Taiwan are vulnerable. In my opinion President Trump has a very small window left in which to fire Bolton and perhaps Pompeo and embark on a more conciliatory line, before China becomes an irreversible, implacable enemy.

This is a traditional problem deeply embedded in Chinese culture. Westerners in the 1800s concluded that it was impossible to write a binding contract in classical Chinese. There were hopes for Mandarin, but... I was reading about this as a college student studying Chinese in the 1970s and have never ceased running across complaints about it. Chinese contracts are only as good as the will of the contractors and the influence you can bring to bear. When you are dealing with government, a contract is good until the officials get replaced with new faces. Even big players like McDonald's are not exempt.

"...what was meant as the flagship of McDonald’s planned expansion into the People’s Republic of China (it already had outlets in Hong Kong and Taiwan) was destined for controversy. In 1994—only two years after opening—a legal battle pitted the transnational corporation against Beijing’s government in a land dispute symptomatic of China’s no holds barred modernization.

"In question was McDonald’s 20-year lease on the strategically located property at Wangfujing—a busy central shopping district—and the city’s attempts to shutter the restaurant to make way for a new super sized shopping mall. McDonald’s balked at the eminent domain order, which flattened the surrounding neighborhood. In the end the burger joint was the lone building standing amid acres of rubble. The dispute raised serious concerns among foreign investors over the efficacy of business contracts in China at a time when the Communist state was seen as the future of global markets.

"But in late 1996 McDonald’s China president Marvin Whaley announced a reconciliation. “In a spirit of teamwork and partnership, we’ve developed a plan that will allow our strong expansion in the city to continue."

Note that it took two years for the "spirit of teamwork and cooperation' to kick in for a multi-billion dollar cooperation who could presumably have just been given another good spot for a hamburger stand. If the officials involved had been willing. Your mileage may vary, but you are unlikely to do better.

Harlan - Yes China is a formidable competititor to the U.S. - not necessarily an enemy but they are getting there. China's use of artificial islands etc in the South China Sea is a dangerous development because of the amount of commerce that must traverse that area. The U.S. must show the military capability in tha area so China dies not make a mis-step.

Yes, I don't like that our manufacturing capacity has been devastated along with the people associated with it. However, the nature of our capitalistic system is to promote the greatest efficiency regardless of any negative fallout. Importing from China was the easiest way to gain that efficiency. If that is blocked, then virtual hi-tech machine manufacturing will restore capacity still absent jobs. What has been missing is a program to assist deplaced workers regain productive and self-esteem building jobs.

Long term we have to come up with a solution to the fact that our manufacturing business is not competitive with other countries. If China is blocked, U.S. companies will do business with Malaysia, Thailand, Mexico or whomever can supply product the cheapest. Yes, we will counter those moves as they emerge but long term the only way for the U.S. to compete is hi-tech automated factories that will not be able to sustain good paying jobs for 300+ million Americans.

For the record and to preclude pointless ad hominem attacks, the Chinese are intelligent hard working people for whom sophisticated business and finance was a way of life while we were still living in mud huts. They revere education. They do not subscribe to Modern Judeo Christian ethics but a much older Confucian creed. For that reason pleas for China to ‘play by the rules” just do not compute.

China is not some modern, fly by night, Westphalian creation. You are dealing with the Middle Kingdom - 3000 years old and the Chinese, after centuries of oppression now demand respect. The idea that once again the West can dictate to China is offensive to Chinese and, considering their economy, downright delusional.

China has its problems. Face as a concept does not extend beyond family and immediate friends, so the concept of higher loyalty to a Chinese nation (ie patriotism) is not strong. Neither is respect for national law, nor respect for institutions or companies. This is the source of all commercial crime (eg: fraud, adulterated products pollution).

The governments reaction to the tendencies of its population include draconian punishments and now attempts at nationwide surveillance.

The problem Trump fails to recognise is that the CCP and its leaders have Face. Threaten that and China will become an implacable and unbeatable enemy.

Walrus, I find the most illuminating thing about your informative post is the reaction you elicited. Comment after comment, in my opinion, illustrates some degree of unwillingness or inability to acknowledge and tolerate a culture clearly different from ours. I am reminded of a South Park episode called "Toleration" in which the whole town wrongly assumes toleration of the other requires wholehearted celebration of the other. Nothing could be further from the truth. There's plenty many of us don't like about today's Chinese culture and society, but it's their culture and society. They don't have to conform to our ways anymore than we have to conform to theirs, but we should acknowledge the difference and deal with it.

True. I am not familiar with the agreements so can't discuss it intelligently.
Just saying it seems hardly anyone lives up to agreements any more regardless of in writing or not.
And dealing with countries is dealing with the people who represent it ..I do believe you catch more flies with honey than vinegar. You can always swat them later if honey doesn't do the trick.

The underlaying philosophies are in some ways diametrically opposed. We in the West are object and goal oriented, with an ideals based culture, while the East has more of a feedback oriented view, ie. Yin and Yang. Even the concept of time is different, as we think of ourselves as individuals, thus moving through our context, the future is in front and the past behind, traveling the events of our lives. While the Eastern view is the past is in front and the future behind, as they see themselves as part of their context and necessarily witness events after they occur, then the situation continues. Both are valid in their own context. Though our presumption of moving toward some ideal is flawed. When some is good, more is not always better. Consider efficiency, which is to do more with less. Then the ideal of efficiency would be to do everything with nothing. Those most committed to this view see Armageddon as the door to their ideal state.
What should be kept in mind about the East is that with Communism and the Party system, then becoming China Inc, to global capitalism, they have adopted essentially Western ideas and tried framing them through their own lens. The reason would be that such an ideals, goal oriented paradigm is very effective in the short and medium term, but creates that much more blowback, in the long term. While China might seem a threat to the current American status quo, the real danger is our own social and economic breakdown. We have been living on the equivalent of a national home loan since Reagan, if not Roosevelt and if the holders of that debt try calling it due, say trading it for remaining public assets, we will be revisiting feudalism. The Russian and the Chinese, as well as the Iranians, etc. are really just boogie men, being thrown up to distract us. This Iranian situation seems to have be a total disconnect with reality. Something is brewing, whether planned, or just the wheels really coming off the train.
Both we and the Chinese seem to be headed to our own versions of Brexit. The Russians went through it with the fall of the Soviet Union.

I understand fully well that the US does not need to abandon her Christian heritage when conducting trade negotiations with the People's Republic of China. At no time have President Trump or President Xi Jinping shown anything other that the greatest respect for one another. No one has lost face during this trade dispute other than the globalist experts who have been enabling the screwing of America's middle and lower classes for a couple of generations.

"As for Universities..." You misunderstand me. I asked where all those graduates of the great Chinese universities were. What need do they have of the west's "best and brightest'? Which, by the way, they have been luring away for a couple of decades. Good for the professors, we've go plenty.
"What are you going to do..."
Take away their (Chinese students') visas, they can study in their own great colleges. It will make plenty of room in ours for actual Americans aspiring to a better future than the ones their parents had. Which is an obligation our elected representatives have been shirking for a couple of decades now.

Quote -“The idea that once again the West can dictate to China is offensive to Chinese and, considering their economy, downright delusional.”
I believe this is the underlying driver to the individual Chinese acceptance of the cost to any conflict, it also links directly to what they see as a Century of Humiliation where China wasn’t powerful. The very use of the word Humiliation in any translation directly links into their concept of Face.
Quote- “China has its problems, Face as a concept does not extend beyond family and immediate friends”
I believe to extend and change this cultural concept of what constitutes Face is behind the national introduction of Social Credit scores for all citizens and available on line to all citizens. It is in fact intended as a national reputation system whereby an unrelated Chinese can lose Face when interacting with other citizens. China is the elephant in the room in any Western political, defence and economic policy debate.

"...the concept of higher loyalty..." Sounds like the Chinese exclusion act might have been a good idea afterall. How many generations in the US will it take for a Chinese national to actually assimiate and become "American"?

"...unbeatable enemy." The PRC is not the Middle Kingdom. President Xi is not the subject of Master Po's "Everlasting Wrong" and he is well aware that China is certainly not "unbeatable". These are trade negotiations and right now they need us one hell of a lot more than we need them. Convincing his fellows in the CCP of that is probably going to be harder for him than for Trump to do the same with Congress.

Thanks for pointing the finger at China -looking out for their own interests - the bloody bas-ards.

I guess you believe that had China had remained insular, the US would not have de-industrialized to a different country? As if NAFTA wasn't a great sucking sound. Hmm. Me things the problem lies closer to home - but no finger pointing there.

Totally impressed with the TrumpTareef - Totally on top of everything.

Oh wait, the tax advantages that encourage de-industrialization remain. But I guess Trump doesn't understand taxes and how wealthy corporations and people use them to move production overseas and not pay taxes ....

Meanwhile, global de-dolarization accelerates. At some % the US loses its special status and there will be a reckoning.

I see a lot of hot air - not new policy: Manufacturing did not come back, US infrastructure is a joke and continues to crumble, workforce participation continues dropping, and hourly median wage remain stagnant. Why? Because it requires actual policies that lessen the profitability of some (very wealthy friends in the circle Trump wants to run).

Americans had nothing to do with the Anglo-Chinese Opium Wars. We did though give them grief by sending missionaries and gunboats. We were also involved in the Boxer Rebellion, but that was on the side of the Qing government and not the rebels.

1. The USA trade deficit with China is huge and China needs to sell to the USA, as it will not find other countries to make up for the lost market.

2. It is not uncommon for supply chains to change. Goods that today are manufactured in China will likely be made in other asian countries which have even lower wages if the trade war really goes for a significant amount of time.

3. The inflationary and GDP contraction risk of a trade war is not that high, as the imported chinese goods make up only 2,3% of the USA GDP.

4. The fact that China has lots of USA sovereign debt is not something that can not be solved by the FED. A few economists have already pointed that in the past 5 or 10 years.

5. China already is an enemy of the USA. Worst case, it will be more active in the hotspots in the World, instead of only spying and hacking the hell out of the USA.

Their is still some cachet in China to have your children taught by “white eyes’ (europeans) at the great universities. At some point China will literally copy Harvard, Oxford, etc. to the last stone and lure the best and brightest staff to them. I’ve seen them do something like this already.

China gets our middle class and the west gets cheap socks in return.As our middle class disappears overseas our cheap socks become unaffordable because there are no jobs for our young workers.The only way to get our middle class back is to stop buying cheap socks.or to put the price up on our middle class.any idiot can make cheap socks but middle class is priceless.the backbone of a stable society.Secondly any society that lives beyond its means through over population is doomed and under no circumstances must it be allowed to expand.China's growing affluence will increase competition for resources as it's middle class expands and this will lead to conflict.Cheap socks might end up causing WWIII